Curb Your Economic Enthusiasm

ZeroHedge blog notes that broadcast journalists and Democrat Pollyannas have seen recent economic news through rose colored glasses. He has a message: sober up.

“The recent uptick in economic high frequency indicators got you up? Felling like suddenly the recession can be avoided because train traffic, whose sole goal is to stock up on even more soon to be liquidated inventory, hasn’t yet collapsed? Happy by the beat in non farm payrolls even though the beat was primarily a function of a one time Verizon strike boost, even as tax withholdings have hit an inflection point and are now declining? Amazed by the surge in car purchases, funded entirely by GM targeted loans issued by Uncle Sam, which have now declined for the first time in a year?

“Don’t be silly warns Goldman’s Jan Hatzius, and presents a list why C grade commentators out there may be caught off guard by the brief pickup in economic activity and proclaim the period of inverse economic growth is over, it is all, quite, pardon the pun, transitory.”

He goes on to list Hatzius’ explanations.

First, Goldman expects a 1/2 to 1% GP growth pace over the next two quarters. The reasoning cites the Philly Fed, small business index, consumer confidence, ISM and housing, all of which are not good.

Then Hatzius says that real income growth has stalled. Real disposable personal income is .3%. That is not conducive to economic expansion and “implies challenging consumption outlook ahead.”

Thirdly, consumer spending is mixed. Vehicle sales are just in a catch up mode from months of weakness and supply chain problems, such as the tsunami.

Finally, financial conditions have tightened. Credit availability will be hurt by the European problem “as it spills over into the U.S. financial system.”

Then there are these statistics offered by bloggers. They give you pause. There are more people unemployed in the U.S. than live in Greece. The number of people on food stamps equals the population of Colombia. The U.S. has enough debt that piled dollar on dollar, it would reach the moon and back – twice.

The Friday jobs number also seems problematic. Although it came in as plus 103,000, some wonder about the seasonality factor. For instance, there is a 700,000 difference between the not seasonally adjusted labor force which came in at minus 322,000 and the seasonally adjusted which was plus 420,000. It’s possible there was a big loss hidden by seasonal adjustments, writes one observer. Backing this up is the employment to population ratio which again declined.

There is still a lot more to come in this economic story.

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